Last updated: February 18, 2013 1:53 pm

Carlsberg hit by slowing demand

Carlsberg dropped its medium-term regional profit targets and issued cautious guidance for this year, sending shares in the Danish brewer down by 6 per cent.

The world’s fourth-largest brewer said its market share in the crucial Russian market – responsible for about 40 per cent of sales and profits – had fallen in the fourth quarter and growth in the country had stalled.

Jørgen Buhl Rasmussen, chief executive, justified the move to drop the targets by saying that Carlsberg’s new goals were largely similar. But analysts and investors disagreed, noting there was no longer a specific margin target for the critical eastern European region.

“They [the old targets] were very difficult to manage because of the big volatility in input costs particularly in eastern Europe and also because of implementation costs, tax increases,” Mr Rasmussen told the Financial Times.

Carlsberg put out operating profit targets in February 2010 for the medium-term – defined as 3-5 years – for western and eastern Europe as well as Asia and the company as a whole.

On Monday it replaced that with a goal of increasing the operating margin in western Europe by an average of at least 0.5 percentage points a year for the next five years, and a “long-term ambition” of delivering growth of more than 10 per cent annually in underlying earnings per share.

Mr Rasmussen said the eastern European margin targets – which had been 26-29 per cent, well ahead of the 15-17 per cent expected in western Europe or 15-20 per cent in Asia – were now included in the earnings per share growth target. “The new target reflects the medium-term growth for the company. Percentages [previous targets] can be very difficult to manage towards,” he added.

The Danish brewer also disappointed slightly in its fourth-quarter results, delivering operating profits of DKr2.15bn, up 17 per cent on the previous year but below analysts’ expectations.

It forecast operating profit of about DKr10bn this year, including DKr300m-DKr400m of costs related to a programme to cut costs and integrate its supply chain better. That compares to an operating profit last year of DKr9.8bn, the same as in 2011.

Carlsberg estimated 2013 would be similar to last year in all its main markets: “challenging” in western Europe, flat to some growth in eastern Europe and strong gains in Asia.

Mr Rasmussen played down the fall in Russian market share from 38.9 per cent in the third quarter to 38.3 per cent at the end of the year, pointing to the trend over the year of a gain of 1.1 percentage points.

“One has to look at trends. One can’t look at this quarter by quarter or month by month. The most important is the trend line,” he added.

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